Argument preview: Health care, Part III — Beyond the mandate

Posted Thu, March 22nd, 2012 12:04 am by Lyle Denniston

On Wednesday, March 28, the Supreme Court holds its third day of hearings on constitutional issues surrounding the new federal health care law. This is the third of four articles that will appear on the blog this week, previewing the issues that the Court has agreed to review. These articles appear in the order that the Court is to hear the issues. On Wednesday, the Court holds two hearings. This article deals with the issue in the first; the final article on the issue being heard second will appear tomorrow. Today’s article examines the impact on the remainder of the Affordable Care Act if the individual mandate is struck down by the Court. This hearing starts at 10 a.m., and will last 90 minutes, split three equal ways. Paul D. Clement of the Washington law firm of Bancroft PLLC, representing the challengers to the ACA, will argue first for 30 minutes, taking the position that all of the Act must fall if the mandate does. Deputy U.S. Solicitor General Edwin S. Kneedler, representing the U.S. government, will argue next for 30 minutes, contending that only two closely related parts of the law must fall if the mandate goes down. Finally, a Court-appointed amicus, Bartow H. Farr III of the Washington law firm of Farr & Taranto, will argue for 30 minutes, urging the Court to rule that no other part of the Act need fall if it nullifies the mandate. (NOTE: This blog provides a full array of background materials on the health care case, at this site.)

Background

In the Supreme Court, a public hearing almost always will be filled with hypotheticals, the “what-ifs” in the law. While they may stray far, they are all supposedly linked in some way to an actual legal issue that is before the Court. Their main value, if they work as intended, is to bring out the broader implications of a ruling one way or another on the underlying legal question. But seldom does the Court explore a hypothetical that pretends that the Court has made a ruling, when it hasn’t yet. That is what the Court will be doing on Wednesday when it confronts a truly strange phenomenon in constitutional law: a court trying to guess, in an informed way, what Congress would have wanted in a federal law if it could not have all that it actually put into the law. It is called the “severability” issue, and that is what the Justices will be examining next Wednesday morning in the Affordable Care Act case.

The theory behind “severability” is one of judicial restraint: out of respect for Congress and its constitutional role as the country’s national legislator, a court that finds it must strike down something Congress has enacted is supposed to nullify no more of that law than is really necessary. With the Affordable Care Act, that might well be a monumental task of selection: the Act is 2,700 pages long, and has nine major sections to it. If the Court strikes down even one of its major provisions, it may then be faced with deciding the fate of the remainder.

It is at least a theoretical possibility that, if the Court were to rule that the new law’s individual mandate is unconstitutional, the entire ACA will be erased from the statute books. That is what makes Wednesday morning’s argument a crucial one. Although the Court will not yet have issued any ruling on the individual mandate’s validity, it will go to the bench Wednesday acting as if it had, as if the mandate were no more. The only way to have avoided that hearing was for the Court to have upheld the mandate and, of course, that will not have happened by Wednesday morning — just one day after the Court reviewed the mandate itself.

Its inquiry into severability will involve a two-step analysis. First, the Court is to consider whether what remains could actually function independently of the part that failed, and would work as Congress expected. If the answer to that is yes, then it must consider whether Congress would have wanted what is left, had it known at the time that it could not have the whole law as written. Congress could not be consulted directly about what it wanted, so the Court will have to engage in some conjecture about that.

There is, in fact, a very big risk — in terms of constitutional separation of powers — when a court does a severability analysis. The risk is that it will create a law that is a product of judicial invention, not legislative intent. The result in any event would not be what Congress actually had passed. Essentially, then, a court is asking whether the end-product fits closely enough to what Congress actually intended. The Court, in fact, is being reminded in the ACA case that rewriting an existing law is Congress’s job, not the courts’. The challengers to the mandate use that argument to try to persuade the Court that the constitutional thing to do is to strike down the whole law, with the mandate, and let Congress start all over and pick up the pieces if it wishes. But the federal government uses a variation of that same argument to try to persuade the Court to do as little as it must so as to preserve most of Congress’s handiwork.

The opposing sides, however, fundamentally disagree on how much of the remainder of the law the challengers are entitled to argue about on Wednesday. The challengers have insisted that what the Court would be doing, after it nullified the mandate, would be to fashion a remedy for what was a constitutional violation, and every other part of the law has to be examined to see if it can survive. The issue, they have argued, is not whether other parts of the law are themselves unconstitutional, but whether they can function without the mandate. The government, however, has argued that the states and the private challengers are legally entitled to ask the Court to nullify only the parts of the law that directly apply to them, and that they have challenged in their lawsuit. They have no legally protected interest in anything else, the government has asserted. The Court may well have to sort that out.

Congress, of course, could have spared the federal courts, including the Supreme Court, the task of deciding the severability issue. It could have written into the law a single clause, declaring that, if any part of the ACA is stricken, the rest is “severable” and that is what we want. At one point, when the new health care bill was under study in the House, it actually included just such a clause. But that did not survive to final passage. In effect, Congress passed the buck on that to the courts.

The issue has been a part of the federal courts’ review of the mandate and the rest of the ACA since the first case was filed in District Court in Pensacola, Fla., seven minutes after President Obama signed the Act into law two years ago. That is the lawsuit that the Supreme Court is now getting set to review. Senior U.S. District Judge Roger Vinson, comparing the entire ACA to a fine watch with all of the parts interacting, ruled first that the mandate was invalid and then concluded that no part of the remainder could work with that part taken out. The judge found that to be Congress’s intention. The case then went to the Eleventh Circuit Court. It, too, nullified the mandate, but it then severed that provision, and only that provision. It said Judge Vinson had made too much of the fact that Congress had passed the law without a severability clause. It did its own interpretation of what Congress had intended, and salvaged the remainder.

Petitions for Certiorari

When the Court, at a private Conference last November 10, looked at the array of ACA cases on its docket, it chose — with considerable care — what it wanted to decide, and in what case. The three petitions, some or all of which the Court accepted for review, all had come up from the Eleventh Circuit Court, in the case that originated in Pensacola. The Court announced four days later that it would hear the government’s appeal on the mandate’s constitutionality (docket 11-398), and added in the question — suggested by the government — that it also review whether anyone had the legal right to challenge the mandate. From the 26 states’ petition (11-400), the Court agreed to hear the challenge to the mandate, the severability issue, and the challenge to the ACA’s expansion of Medicaid for the poor. And from private parties (in 11-393) — the National Federation of Independent Business and four of its individual members, it accepted the severability issue.

On severability, the government wanted the Court to rule that, if it nullified the individual mandate, it should also “sever” (and thus salvage) the rest of the Act, with only two exceptions: the requirement that the insurance companies not turn away insurance applicants with preexisting medical conditions, and the provision that companies could not raise their premiums without limit to cover their new coverage obligations. Those, the government said, were so closely linked to the mandate that they could not function without it. The states and the private challengers wanted the entire Act nullified along with the mandate. The Court named a private Washington attorney, H. Bartow Farr III, who was not involved in the case, as an amicus to argue the third option: keep all of the ACA intact even if the mandate were nullified. That is a fairly common practice at the Court when an issue lurks in a case, but neither of the parties is arguing that angle even though it does interest the Court. Farr will join in Wednesday’s argument, as will one lawyer representing all of the challengers, and one lawyer for the federal government. The states and the private challengers, however, have filed separate merits briefs.

Briefs on the Merits

The 26 challenging states’ merits brief opened with an effort to put in the Justices’ minds an implication that the entire ACA was a flawed project, that its method of passage was somewhat illegitimate, and that it was a product of partisan choice by the Democrats. In essence, this front section conveyed a suggestion that the Democrats, because of the loss of one of their seats in a special Senate election in Massachusetts to a foe of health care legislation, were rushing to judgment to get the measure enacted while they still controlled Congress.

That, to be sure, is not a legal argument, but it presumably was intended to create an atmosphere of doubt about whether the Court should defer to Congress, as it sometimes does on the basis of a presumption that what the lawmakers do is a proper use of their undoubted legislative authority. It is not exactly tinged with partisan flavor, but it hints at that.

On the merits, the states urged the Court not to run through the multitude of individual provisions in this massive law, but to make a “broader inquiry into the manner in which Congress intended the ACA to function.” Doing that, the states contended, would show “an interconnectedness” that, as Judge Vinson had found, makes the law like a finely balanced clock, “comprised of pieces that all work toward one primary legislative goal.” That goal, the states noted, was to create a health insurance system that was nearly universal, spreading to virtually all Americans, including the tens of millions who do not now have such coverage.

The goal, according to this brief, was served by both a variety of provisions to increase the “demand side” in the insurance market, and another set of provisions to increase the “supply side.” Demand would be enhanced by the mandate requiring virtually every American to obtain health insurance. But that demand would have to be met, so Congress also sought to increase the supply by barring insurance companies from denying coverage to high-risk individuals and at affordable rates, by creating new health care “exchanges” as a kind of state-level shopping mall for affordable insurance, by requiring employers with 50 or more employees to provide an assured package of coverage for their workers, and by increasing the Medicaid program for the poor in a way that would bring in many millions of individuals eligible for it but not yet taking part. (The blog will preview the arguments on the Medicaid expansion tomorrow.)

Commenting that many other provisions of the ACA “do not bear as obvious of a relationship to increasing the demand for or supply of health insurance,” the states’ brief nonetheless walked the Court through all of the remaining titles of the Act and argued that each of them is meant in some way to contribute to the goal of near-universal health insurance without adding to the federal budget deficit. These include major increases in Medicare spending on health care for the elderly, as well as various cost-cutting and quality-of-care initiatives to bring down the overall cost of health care. In short, the brief asserted, all of the hundreds of provisions “are part and parcel of…the supply-meets-demand vision of near-universal insurance coverage.” The mandate, it said, cannot be “decoupled” from any of the Act’s provisions.

Even without a “severability” clause, the states’ brief contended, Congress left no doubt that it wanted the entire Act to work together.

With that as the foundation of it “severability” analysis, the states’ merits brief turned to answer the government argument that the states had a legal right only to ask the Court to strike down specific provisions that they had claimed put a burden on them. Severability, it argued, does not require the states to challenge the validity of any other part of the law, but puts the entire Act on trial as to whether it relates to the nullified part — here, the mandate, should the Court strike it down. All that the challengers are doing by listing the other parts of the law as vulnerable is to aid the Court to decide “what remedial consequences flow” from the challengers’ goal of ending the mandate, according to the brief. The Court’s task, it added, is to decide “which remedy would do the least damage to Congress’s intent.”

The separate merits brief of the National Federation of Independent Business and its four individual members, like the states’ brief, began with an explicit recital of the Democratic efforts to speed the ACA through Capitol Hill in order to get it done before they lost their effective control of the legislative process in the filibuster-prone Senate. That brief actually traced the origins of the Democratic effort back to the presidential campaign between Barack Obama and Hillary Clinton in 2008. That filing also sought to use, as part of its severability argument, the fact that the House — in order to get the measure approved in that chamber — had used the parliamentary device of an all-or-nothing choice for the House. That, too, showed that Congress wanted “this unique legislative deal to rise or fall as a whole.”

Its other arguments on the severability question closely parallel those of the challenging states, and it wound up with a plea to leave it to Congress to reconsider what to do in the wake of invalidation of the entire ACA.

The federal government’s merits brief chose to emphasize an argument it had only hinted at in earlier filings: that the validity of the entire Act would not even be before the Court even if the Justices were to nullify the individual mandate. The states and the private challengers, it argued, “may not challenge the myriad provisions of the Act that do not apply to them. Parties must demonstrate standing for each form of relief they seek and, in doing so, cannot rely on the rights of third parties.” The Eleventh Circuit Court, it added, also was wrong in considering itself free to examine “the myriad provisions” that do not apply to the states or the private challengers.

In a somewhat complex mix of arguments, the government worked its way toward a conclusion that the Court need not consider the severability question at all. That begins with its concession that the only legitimate challengers to the individual mandate itself are the four individual members of the NFIB, because they would be obliged to obtain health insurance. It contended that the states have no “standing” to challenge the mandate.

It went on to suggest that, while the states might have a legal right to contest the ACA’s other mandate — requiring large employers to provide adequate coverage for their workers – that would make no difference since the states would be barred from challenging that tax-related mandate by the federal Anti-Injunction Act, which forbids court challenges to a tax provision before it actually goes into effect. Further, the government said the states would have “standing” to challenge the Medicaid expansion if the mandate falls, but asserted that the Court need not decide that at all, because the failure of the mandate has nothing to do with the states, and so they have no right to claim a remedy from its invalidation.

As for the individual members of the NFIB, the government brief contended that they could not even ask the Court to invalidate, with the mandate, the provisions of the ACA that the government itself says would have to fall — that is, the no-exclusion requirement for the insurance companies and the bar to unlimited premium increases.

Having sought to demolish the notion that any other part of the ACA is technically or necessarily before the Court, the U.S. brief then conceded that, if the Court did feel obliged to rule on the severability question, it should strike down only the two provisions that the government concedes are closely intertwined with the individual mandate. All of the other parts of the Act, whether directed at increasing the supply of insurance or at lowering health care costs or improving medical care, can operate entirely independently of the mandate, the brief said. Indeed, it argued, many of these simply have nothing to do with insurance coverage at all.

The Court-appointed amicus lawyer on the severability issue, Bartow Farr, opened his brief by arguing that both the challengers and the federal government “are asking this Court to invalidate perfectly lawful provisions of a federal statute.” That, he added, is a “kind of extreme judicial intervention” that the Court indulges only in “rare cases.”

It is customary, Farr said, to presume that parts of a law not struck down are to be severed and thus salvaged. But, beyond that, his brief said, Congress would not have wanted to lose even the two provisions the federal government would say could not be salvaged. Those two provisions, according to Farr, are the core reforms of the insurance industry that Congress imposed and, without them, “it seems improbable that…Congress would prefer to put many…consumers back where they were before passage of the Act, facing the prohibitively high costs and outright denial of coverage that were standard features of the market that Congress was trying to change.” There is no evidence that that would be Congress’s wish, he asserted.

Farr also disputed the argument, made in different ways but advanced by both the challengers and the government, that the mandate is truly central to the overall Act. In making findings that the mandate was the heart of the Act, Congress really was saying, Farr argued, that the mandate was central to its broader regulation of the health insurance industry “by bringing new insureds into an otherwise risk-based insurance market.” Congress, he insisted, would still have wanted the other market reforms to continue, including the provisions the government deems vulnerable to nullification along with the mandate.

Farr also took direct issue with the challengers over how the Court should approach the severability issue. The challengers, he noted, have insisted that the issue is whether the law without the mandate can function in a way that squares with Congress’s intent. If that were the right approach, Farr said, it would require the Court to make its own comparison between the law without the mandate and the law in its original form, because Congress “naturally intends a statute” to function with all of its clauses intact. The right approach, the amicus contended, is to analyze whether Congress would have preferred what was left of a law to having no law at all. Congress, he argued, would not have preferred no health care law at all if it was told that the mandate was invalid.

Turning to the government’s contention that the Court need not address severability at all, because of the procedural flaws in the challenges, Farr said he disagreed. The reasoning behind that thrust, the amicus argued, “is unconvincing.” When a court considers whether the nullification of one part of a law should lead to nullification of other parts, it is not deciding a new case or a new claim for relief, but is only seeking a remedy — essentially, the argument that the states emphasize in their merits brief. There is no requirement for proof that a challenger has “standing” to ask that other parts be stricken, too, his brief contended.

Since this is a matter of “remedial discretion,” Farr said, the Court need not decide severability, but he said it should. “Deferral of the severability question will lead to needless uncertainty about the enforceability of other provisions of the Act,” the brief said, “putting in question the legitimacy of already effective provisions as well as casting doubt over ongoing preparation for statutorily required changes in the health insurance market. It would be a more fitting use of the Court’s remedial discretion to address those issues now, rather than to leave them for resolution at a later time.”

As a final departure from the positions of the combatants, Farr disagreed that, if the mandate is nullified, a “death spiral” would set in that would bring down the entire new health care law because it would deprive the insurance companies of the guaranteed pool of premium-payers and yet they would still have to cover the medical services that the uninsured would need in the future. Congress, Farr said, has put into the ACA mechanisms to head off that prospect. There are incentives for the uninsured to buy insurance before they are sick, he said, and there are generous subsidies to entice low-income people to go into the market for insurance even while they are in good health. There would be no “death spiral,” he argued.

Farr’s bottom line: if the Court strikes down the mandate, that and its attached penalty for not obtaining insurance, “and nothing more,” should be cast aside. “The Court should seldom invalidate statutory provisions that are not themselves unconstitutional,” he summed up.

Briefs of the amici

As might be expected, the Court gets a wider variety of arguments from amici on the severability issue than on any of the other issues that the Justices are reviewing. There are roughly four groups: those that want all of the law to fall if the mandate does, those that want some to fall but not others, those that want none of the other provisions to be cast aside, and those that are most concerned about specific provisions benefiting their constituencies, which they, of course, want salvaged. A theme that runs through those that want the Court to go far to nullify all or most of the ACA is the “death spiral” argument — that is, without the mandate producing millions of new premium-payers, all of the other changes in the health care industry will collapse in financial ruin.

Among those that want the entire ACA to be nullified, there are 144 members of the House of Representatives, 36 members of the Senate, the U.S. Chamber of Commerce, 103 economists who are analysts of the health care market, advocates of limited government such as the Competitive Enterprise Institute, conservative advocacy groups like the American Center for Law and Justice and the American Civil Rights Union, and the National Restaurant Association. There is even one brief, from a group named the Western Center for Journalism, arguing that the entire ACA is invalid because President Obama is not a legitimate President, and thus could not sign the bill into law, because he has not proved that he is a natural-born citizen eligible for the White House.

Selective nullification of other parts of the ACA, along with the mandate, was pressed in briefs from the libertarian Cato Institute, calling for nullification of the Medicaid expansion and insurance premium subsidies; the American Benefits Council, an advocacy group for employer health plan operators, including 150 large companies, advocating the striking of the insurance market changes and the new mandate for employers to provide adequate and affordable policies for their workers; and the American Hospital Association and other institutional providers of health care, arguing that the Medicare and Medicaid spending cuts and penalties cannot survive without the mandate.

Amicus Farr’s argument that no other parts of the ACA are vulnerable drew the support of 12 states and Washington, D.C., arguing that they are already moving to carry out many parts of the law, plus groups representing Asian-Americans, Hawaiians and Pacific Islanders, as well as low-income groups in the Milwaukee area and in Michigan, and organizations representing doctors and medical students.

The federal government’s argument that two key insurance industry changes would have to fall with the mandate was embraced by the American Health Insurance Plans, a trade group whose members insure 200 million Americans, along with the American Academy of Actuaries, a group whose members analyze patterns of risk for insurers.

Among the groups that sought to defend programs special to them were various advocates for the elderly, such as the AARP, supporting the Medicaid revisions; an array of public health organizations, such as the American Public Health Association, defending the preventive care and other public health initiatives in the ACA; the National Indian Health Board, speaking up for the Indian-specific changes in the law, and several groups advocating benefit rights of former coal-miners (or their survivors) who contracted black-lung disease; the Act expands eligibility for some of those benefits.

Analysis

No part of the exercise of going over the ACA to see what might be saved would be necessary if the Court were to uphold the individual insurance mandate, and that option has some impressive support behind it. As a matter of timing, the public — and the advocates — probably are not going to know what the Court has chosen to do about the mandate until the entire final ruling comes out. It is doubtful that this overall decision will be made and announced piecemeal. Once next week’s hearings are over, and preliminary votes are cast privately within the Court, the Justice or Justices who are to prepare draft opinions on the issues will be selected, and that process will then proceed.

The Court would probably have to decide all four of the questions before it if, on the mandate issue, it opted to nullify the insurance requirement and its penalty. It might have to decide only two, at most, if it found that no one could challenge the individual mandate (under the federal Anti-Injunction Act). The mandate and the severability issues would then be off the table, and the Court would be left to weigh the validity of the Medicaid expansion, although it is somewhat unclear whether a ruling on that would be premature if the mandate’s fate is left up in the air until after it went into effect in 2014.

But assuming, for the moment, that the Court turns aside the Anti-Injunction Act challenge, and votes to strike down the mandate, it has an almost dizzying array of choices about its next step beyond that. But the two options that seem least likely are the federal government’s idea that the Court need not rule at all on the severability question, and a suggestion that no one seems to have embraced but that is mentioned in some of the filings — that the Court send that question back to the lower courts for some new analysis, perhaps including additional fact-finding. Amicus Farr has gone far to undermine the government suggestion that it should take a pass on the severability issue as an act of restraint, especially since Farr does not accept the government’s quite novel argument about how the states and private challengers are not in a position to ask for much, if anything, on the point. Farr also has made a fervent plea for the Court to end the national uncertainty over the fate of the remainder of the ACA if the mandate is stricken.

The Court, of course, has the complete option to accept, reject or ignore the arguments made by Farr, even though it invited him to make them. But the reality is that the Court is very careful in selecting lawyers to perform that unusual role, and it has a good deal of respect for what it hears from them. It also usually has great respect for what the federal government’s lawyers ask of it, but in this instance, the arguments about avoiding the severability question altogether, even if the mandate goes, seem quite strained. Perhaps the only appeal of that line of argument is that it might spare the Court the agony of sorting through the remainder of the Act.

If the Court sees its own role as very limited, once it pared the mandate from the Act, it has a stark choice available as an ultimate gesture: strike down the entire Act as the states and private challengers want and leave the aftermath to Congress, or uphold all of the remainder of the ACA as Farr has suggested and leave it to Congress to weigh whether to revise what is left to avoid a cataclysmic failure of the entire health care project. Those seem like unattractive alternatives to a Court that sometimes sees itself as preferring minimalist outcomes.

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